French Trader Who Lost $7 Billion Talks to Police

Jan. 26, 2008— -- Jerome Kerviel, the rogue French trader who allegedly lost billions for one of the world's largest banks, is reportedly now talking to French authorities at a police station in Paris.

Kerviel single-handedly broke Societe General earlier this week by making bad stock market bets at a loss of $7.14 billion, and gambling tens of billions of dollars more of the bank's money, according to officials.

Since news broke of the financial scandal, which helped send the banking sector into a tailspin on Thursday, the 31-year-old trader had not been seen before he was taken into custody, which was reported today by The Associated Press.

Police searched Kerviel's Paris apartment on Friday, taking several briefcases with them as they left.

Who Is France's $7 Billion Man?

His employers, Societe Generale, are portraying Kerviel as an evil genius who developed an elaborate scheme to hide tens of billions of dollars in bad trades from his bosses.

Other people who know him, however, describe someone much less threatening -- a loner who recently lost his father and his girlfriend, and a low-level trader who was never involved in big deals.

In the small town in northern France where Kerviel grew up, neighbors say he was known for his hard work and a boyish resemblance to Tom Cruise, anything but the potential to single-handedly break a bank.

"I don't know how he got this far, billions of dollars...my God, it's so sad," said one of his neighbors.

Kerviel's family and lawyer have insisted he is innocent.

All His Fault?

The reactions from those who knew him have many in France and around the world wondering whether the lone trader should shoulder all the blame.

Shareholders and politicians are now questioning controls at Societe Generale and other leading banks to determine if Kerviel could really be fully responsible for so much damage and, perhaps more importantly, if it could happen again.

The bank, France's second-largest, apologized to shareholders in full-page newspaper ads Friday after announcing the fraud, apparently the biggest ever carried out by a single person.

It's Happened Before

Nick Leeson lost $1.4 billion for the British bank Barings in 1995. Like Kerviel, Leeson's losses spiralled as he tried to turn bad bets into good ones.

"Probably his biggest fear is the fear of failure, as it was mine, as it is today. I don't think that people that are working in that fast paced environment that is so bred or so built around winning and making money, the fear of failure that is there is the thing that they just can't confront," Lesson said, commenting on Kerviel's case.

Leeson's case sparked calls for reform and even inspired a film, "Rogue Trader" starring Ewan McGregor.

In 1996, it happened again, when a copper trader in Japan lost $2.5 billion.